Sun eyes cost cuts, HP delaying raises

Peter Henderson

SAN FRANCISCO: The US economic slowdown hit Silicon Valley again on Thursday

as a Sun Microsystems Inc. internal memo detailed cut plans and a newspaper

reported Hewlett-Packard Co. had told employees it would delay raises to trim

spending.

The developments - and a cost-saving drive at software giant Microsoft Corp.

made public this week - highlight the new emphasis on thrift for technology

firms given the slowing economy.

"We will have to adjust. We will have to respond to changing economic

situations in our spending and hiring decisions. As the market sorts out its

economic uncertainty, we will need to continue the cost controls we put in place

this quarter," Sun chief executive Scott McNealy said in the memo, a copy

of which was obtained by Reuters.

McNealy, who outlined his thoughts on the economy cooling off

"especially in the dotcom environment," said Sun was still

"storming the market" and dismissed rumors that Sun was delaying

shipments of UltraSparc III, the micro chip powering a new line of servers.

Separately, the San Jose Mercury News reported that Hewlett-Packard has

delayed employee salary raises by at least three months as a cost-cutting

measure.

It quoted sources at the third-largest personal computer as saying the firm

aimed to save $100 million to $140 million and had sent a memo on the delay to

employees this week.

Dave Berman, spokesman for Palo Alto, Calif.-based Hewlett-Packard, declined

to comment on the report but said the company was cutting spending.

"We said on December 6 that we were going to try reduce our costs and

bring them more in line with anticipated revenues. We have communicated that to

our employees and are asking them to make some short-term sacrifices in order to

avoid some other measures that might have to be taken later," he said.

(C) Reuters Limited 2000.